Abstract: In this article, we explore the nature of the urban system in the Valley of Oaxaca as it has developed in the late 20th century, when Mexico joined the General Agreement on Tariffs and Trade (GATT) (1986) and negotiated the North American Free Trade Agreement (NAFTA) with the United States and Canada (1994, with final aspects of the agreement going into effect in 2008). Both the events exposed Mexico and, by extension, Oaxaca to powerful external economic forces. Global integration significantly altered the urban and regional economic systems in the central valleys of Oaxaca. The conquest of Mexico by Spain in the early 16th century brought Mexico into the global economic system centered in Europe. For most of the five centuries since the arrival of the Spanish, Oaxaca was part of what Immanuel Wallerstein described as the periphery, that is, regions whose primary role in the system was to provide raw goods and labor to core regions such as Mexico City, Madrid, London, and New York. This article describes how the integration of Oaxaca into the world economy that resulted from Mexico's entry into GATT and NAFTA altered the nature of the urban system in the central valleys of Oaxaca. These changes significantly increased the role of Oaxaca City in the extraction of resources from the state into the world economy and increased wealth disparities in the central valleys.